The liquid, high grade corporate bond market has done well. While it broke the uptrend (A) it has moved in a sideways consolidation pattern for the last six months. There are two lines of support B and C.
The junk bond market is in the same boat. While it has broken the uptreands of A and B, it is currently moving sideways and has support at C and D.
The mortgage backed market is also in an uptrend (A). While momentum is neutral (B) there is plenty of money going into the market (C). Also note the Fed is nearly done with its purchase programs:
Mr. Bullard also said that though the Fed is on track to end its $1.25 trillion purchase program for mortgage-backed securities, it continues to leave open the option of returning if the housing market needs it.The Fed has pared down its weekly purchases to about $10 billion, from a high of $25 billion to $30 billion at its peak. The central bank has $14 billion left to purchase in the next couple of weeks, according to latest data from the central bank.
"Yields haven't opened up, and we don't expect much to happen at the end of month, or at the end of program," he said. "All indications are that it's going to be a seamless transition."
Despite the ending of this program, the bottom hasn't fallen out of the MBB market.
And finally, the A2/P2 spread has come in and has been stable for some time.
In short, we're back to normal.
